Toshiba Accounting Scandal Could Serve Death Blow to Company

Toshiba has announced results of their business operations and warned that it might not survive for long. The results were not endorsed by their auditor, PricewaterhouseCoopers (PwC) Aarata LLC because they could not be sure that the accounting done for Westinghouse was done properly.

Toshiba CEO Satoshi Tsukanawa, said, “They asked us to prove that we didn’t have anything wrong in our bookkeeping process, and that is quite a burden.”

Toshiba said, “There are material events and conditions that raise substantial doubt about the company’s ability to continue as a going concern.” The electronics giant reported making a loss of 532 billion yen or around $4.8 billion for last year’s operations from April to December.

Last month, its U.S. nuclear unit, Westinghouse, filed for Chapter 11 bankruptcy which allows it to be protected from creditors while it is undergoing restructuring. This will bring Toshiba into a net loss of $9.1 billion for the fiscal year ended March 31, 2017.

Toyota also had an accounting scandal that was uncovered in 2015. It was found that Toshiba had wrongfully padded the previous years’ profits by $1.2 billion.

Toshiba has delayed their publication of financial results twice already, and this increases the risk that they might be delisted from the Tokyo Stock Exchange.

Toshiba CEO Satoshi Tsukanawa submitted their audited results rather than delaying their announcement for the third time. Tsukanawa said, “The decision on any delisting is for the stock exchange to make. We will do our utmost to avoid it.”

To repair its balance sheet, Toshiba is now looking to sell a majority stake in their highly coveted computer chip business. Tsukanawa estimates that they can get at least 2 trillion yen or $18 billion from the sale of it. According to reports, Foxconn, one of Apple’s key suppliers, offered to buy Toyota’s computer chip business for 3 trillion yen or $27 billion.

Tsunakawa said, “I believe our financial standing is solid, despite the numbers we put out if we consider the value of the unit for sale.”

Analysts believe that the memory-chip market will continue to grow and Toshiba’s latest financial performance does give weight to the idea that the business is healthy. For last year’s April to December period, its memory-chip business was able to generate an operating profit of 102 billion yen which represents a 9% growth from the same period in 2015.

However, Foxconn has close ties to China, and thus the company can be deemed as a risk to national security. Hiroshige Seko, Japan’s trade minister, emphasized that the chip technology of Toshiba was not just a part of Japan’s growth strategy but jobs and information security as well. Seko said, “For those reasons, we continue to carefully monitor Toshiba’s business conditions and the sale of its chip business.”

According to HIS Markit, Toshiba is in 2nd place behind Samsung regarding revenue for the extensively used NAND flash-memory chips.

Tsunakawa said that later in May, Toshiba will release its financial results for the full fiscal year ended March 31.

Delta Delay Reaches 5th Day

Since last Wednesday, America’s 2nd largest carrier has canceled around 3,500 flights. Out of those 3,500 flights, more than 2,300 of those were due to the massive computer failure Delta incurred last August. That event led to CEO Ed Bastian to issue an apology. There was a huge storm that hit Atlanta last Wednesday that affected Delta operations.

The Federal Aviation Administration ordered a ground stop for all flights at Atlanta last Wednesday for approximately four and a half hours. According to Bob Edwards, a former chief information officer at United Continental Holdings, Inc., a halt of 30 minutes to two hours is normal but something almost five years makes everything “exponentially worse.”

Edwards said, “There was probably a large number of pilots and crews that timed out, and they timed out in places where there probably were not replacements. I do not want to underestimate the chaos that a five-hour ground stop would cause. Canceling quickly and getting ahead of it and staying ahead of it with cancellations is the key.”

Delta Airlines spokesman Michael Thomas, said, “Unfortunately, availability of flight crews to operate within federally mandated crew rest and duty day guidelines following last week’s disruption are still prompting some additional cancellations and delays. We know this extremely frustrating for our customers, and we apologize for that. Delta teams continue to work around the clock to fully reset our operation and keep customers informed.

The airlines said that operations were “stabilizing” on Sunday. However, aviation regulation on pilot and flight attendant rest were causing staff shortage to fly and run flights. The airlines have advised its passengers to check online for regular updates on flights as there could be more flights that could be canceled. It has offered waivers to help passengers rebook flights for free.

Severe weather walloped the mid-Atlantic region, the Northeast, and Georgia which created tornado-like conditions near Hartsfield-Jackson International Airport in Atlanta. 60% of its fleet passes through it daily. Delta Chief Operating Officer Gil West described the storms as “unprecedented.” She also acknowledged that the response of the Airline could have been much better.

West, said, “When Delta does not fly aircraft, not only do customers not get to their destination, but flight crews do not get to where they are scheduled to be. When this happens, unfortunately, further delays and cancellations result. And flight crews can only be on duty for a limited time before rest periods are required by law.”

Edwards said that the key to this kind of situation is to be proactive at canceling flights ahead of things like storms. This helps airlines reset their networks and crew.

Last August 2016, Delta Airlines was also affected by a computer outage that led to 2,300 flights canceled and three days of affected flights. The company also lost at least $100 million in lost revenue. Another computer issue in January led to two days of affected flights for Delta.

Airlines officials said that finding empty seats is likely to be a challenge because of the current heavy spring break travel.

Caterpillar Closes Aurora Plant and Lays-off 800

Caterpillar, Inc. is closing its Aurora factory, near Oswego. This would make 800 of the workers unemployed, and those that are spared will be transferred to their other U.S. plants by the end of next year.

Caterpillar expects a full closure of the factory by the end of next year. Those that got lay off will get 40 hours of pay per year of service with the company. Spokeswoman Lisa Miller, said, “The company will work with community leaders to determine the future use of the facility.”

Caterpillar will likely continue maintaining an Aurora office for their product support and engineering work.

Ryan McCrady, president of the Economic Development Corp. (EDC) of Decatur and Macon County, said, “The move is a testament to the quality of employees already in Decatur and a sign that the city can supply the needed additional workers. We like to win but we’re respectful of the fact that people’s lives are impacted here. Decatur’s a great place and we’ll welcome them, and welcome the opportunity to help Caterpillar.”

McGrady said that the EDC will provide support to Caterpillar along with the Greater Decatur Chamber of Commerce, Richland Community College and Milikin University. McGrady said, “Caterpillar, without a doubt, has been a significant part of Decatur’s history. We’ll be glad to have them as a significant part of our future too.”

City Manager Tim Gleason said that there were no incentives offered to transfer jobs from Aurora to Decatur.

Miller said, “Out of about 800 production positions, about 500 positions would likely be added to Decatur and about 150 positions would be added in North Little Rock. We anticipate some will move to various suppliers and some positions would also be eliminated.”

The continued global slump in mining and construction is driving Caterpillar to rationalize its operations the past few years. In 2016, Caterpillar’s global sales dropped to $39 billion. It expects to make $38 billion this year.

Denise Johnson, Resource Industries group president, said, “Faced with lower demand, we continue to evaluate our global manufacturing capacity. Moving production from Aurora to other existing facilities allows Caterpillar to efficiently leverage manufacturing space while still preserving capacity for an upturn.”

Early in the year, Caterpillar announced that they were considering transferring the production of their large wheel loaders and compactors to Decatur. The production for medium wheel loaders is being considered to be transferred to North Little Rock Arkansas.

Johnson said, “Moving production from Aurora to other existing facilities allows Caterpillar to efficiently leverage manufacturing space while preserving capacity for an upturn. Supporting impacted employees through this transition is a top priority, as we know these actions are difficult for our talented and dedicated people.”

Caterpillar is also transferring their headquarters from Peoria to Chicago because of its strategic location. Around 300 personnel will be based in their new headquarters.

Also, Caterpillar is also planning to close their Belgium manufacturing plant which will affect 2,000 personnel. They will also be transferred to other Caterpillar plants.

Lloyds of London chooses Brussels for its EU subsidiary

Lloyds of London, a long-time player in the insurance market in Britain, has decided that Brussels will be its headquarters for its European Union subsidiary. The reason cited for choosing Brussels was its strong regulatory framework.

This decision comes right after a day when British Prime Minister Theresa May executed Article 50 which signals the two-year countdown to Brexit. Lloyds was very vocal about its need to have an EU subsidiary once Brexit becomes a reality.

Lloyds of London Chairman John Nelson said, “We are a market, we are unique, we are not like an insurance company-we needed to find a regulator with the resources and the bandwidth to regulate the Lloyd’s market.”

Nelson said the Brussels office would employ staff in the fields of compliance and information technology. The Brussels subsidiary would also have its board of directors.

Lloyd’s has 700 employees in London and will commence their Brussels office starting January 1, 2019. Around 100 jobs from London could be shifted to the Brussels office.

Lloyd’s chief executive Inga Beale said, “I am excited about the opportunities this venture will offer the market by providing that important European access efficiently.

Lloyds Company said, “The company will be able to write risks from all 27 European Union and three European Economic Area states after the United Kingdom has left the EU, providing our customers and partners continued access to the innovative solutions of the Lloyd’s market.”

11% of Lloyd’s business comes from Europe excluding Britain. For 2016, Lloyd’s had a pre-tax profit of 2.1 billion pounds. However, stiff competition and natural catastrophes led to sharp drop in its underwriting profit from 2 billion to 500 million pounds. Claims skyrocketed due to wildfires in Canada, and from Hurricane Matthew. Fortunately, Lloyds enjoyed an increase in investment returns as well as Forex gains as a result of the collapse of the British pound due to Brexit.

Beale said that until 2019, there would be no major adjustments in its existing insurance policies. Beale said, “It is not crucial that the UK government and the European Union proceed to negotiate an agreement that allows business to continue to flow under the best possible conditions once the UK formally leaves the EU. I believe it is important not just for London but also for Europe that we reach a mutually beneficial agreement.”

Aside from Brussels, Lloyds was also considering Luxembourg, Dublin and Malta for its EU subsidiary office. The final shortlist was between Brussels and Luxembourg.

U.S. insurer AIG has decided it will set up its EU hub in Luxembourg while Lloyd’s insurer Hiscox will decide whether its EU office will be in Malta or Luxembourg.

Sarj Panesar, global head of business development for insurance at Societe Generale Securities Services, said, “The next question is how many of the other UK-domiciled insurers and reinsurers will follow. We can expect some to join Lloyd’s in Brussels.”

Lloyd’s started in 1688 in Edward Lloyd’s coffee house. It now houses over 80 syndicates in modern London. These syndicates offer specialist insurance and reinsurance in almost everything including athletes’ legs and offshore oil rigs.

Generation Y’s Biggest Investment Mistake

MillenniaAccording to a CNBC news report in April 2015, young investors, or the millennials known as Generation Y, need to overcome their jaded outlook about stock investments and financial markets. Experts believe that many of the young investors are chasing after the wrong stocks with expensive consequences. One portfolio manager summed up the younger generation’s biggest investment error.

He said that many young investors are putting their money in such exciting and expensive names as Tesla and Twitter rather than looking at stock investments more conservatively. However, there are also a large number of Generation Y Americans who do not invest in stocks at all. According to a Bankrate.com survey, just over 25% of people under 30 are stock investors. That number is low when you compare it to the number who invest between 50 and 64 years old (58%).

Surveys show that the younger generation is not a financially astute group of people and, for the most part, distrust stocks and the markets. However, these people, who were born in the early 80s to late 90s, can lose out on the opportunity of time by sitting complacently on the financial sidelines. That’s because the major value proposition of young investors today is a compounding interest rate. Therefore, the biggest benefit connected with investing for young people is a lengthy horizon of time.

When you consider the market has risen by 2,000% since 1985, that is a major return over a 30-year period. That is also the same amount of time millennials are now looking at between now and their own retirement. If you are used to living through economic downturns, which millennials are, then investing conservatively in stocks today can offer exponential rewards in the future.

Most financial experts concur that the most propitious time to begin stock investing is when a person is young and can wade through the downturns as well as take advantage of compounding interest rates. The main reason that millennials are not investing is a dearth of financial knowledge, all which makes them less confident about putting money into stocks. Another reason is a lack of money.

Canadian Government to Follow CFPB’s Lead in Curbing Payday Loans

Parliament HillThe United States consumer watchdog agency unveiled a series of proposed rules to curb the payday loan industry, which has generated mixed reviews from groups and the industry.

On Thursday, the Consumer Financial Protection Bureau (CFPB) announced its proposal that would cap the number of payday loans a customer can borrow, limit how many times a payday loan store can debit an account and require businesses to inquire about the client’s income to determine if they can repay the principal sum.

According to CFPB director Richard Cordray, the general public will have up to 90 days to comment on the proposal. Since it doesn’t require conrgressional approval, the rule could be rolled out as early as next year. The CFPB, which has chastized the business models of payday loan companies, has taken swift action against a often criticized industry.

North of the border, organizations are calling for similar action. Some Canadian groups are urging the federal government to follow in the footsteps of the CFPB by adopting similar measures that would rein in an industry that has faced a lot of ridicule over the years.

Despite provinces and municipalities implementing their own rules and regulations, ACORN Canada says Ottawa needs to intervene and prevent consumers from entering into a debt trap.

“Although some needed proposed protections — such as the requirement that longer-term loan payments consume no more than 5 per cent of a borrower’s monthly income — were dropped, this crackdown starting at the national level is desperately needed in the U.S. and Canada,” said ACORN spokeswoman Donna Borden in a statement.

Across Canada, each province has installed its own cap on payday loan interest rates. Meanwhile, the Department of Finance has confirmed that the government is honing in on raising awareness about the dangers of borrowing internet loans online. It also noted that it’s working closely with the provinces to “maintain the integrity of the payday lending framework.”

Tom Cooper, director of the Hamilton Roundtable for Poverty Reduction, told the Associated Press that this isn’t good enough. Cooper believes the Canadian government has facilitated the rise of payday loans in the country because the national banking system has been a failure.

“The federal government really kicked the can of regulation down to the provinces and so we have a patchwork quilt of what provincial governments are doing in terms of regulating the payday loan industry,” he told the news organization.

Canadian payday loan businesses warn that if Ottawa were to install its own regulations, which effectively duplicates or even triplicates other legislation, then it would eliminate an important financial option for struggling consumers.

“A huge number of Americans who rely on short-term loans who under these new rules will be unable to get them,” said Canadian Payday Loan Association president Tony Irwin. “Those are people who need money now so if actions are going to be taken that are going to restrict the markets, you need to have alternatives in place, if not where are they going to go?”

Anti-poverty organizations, the Canadian Union of Public Employees (CUPE) and liberal media outlets are encouraging the government to establish a National Postal Bank.

Tax Software Poses Security Risks for Americans

Tax ScamEvery year, many people in the United States file their tax returns online using software that is part of an IRS tax filing program. However, officials are urging consumers to exercise caution if this is something that they plan to do because some tax filing software poses security risks. The warning comes following an audit of IRS tax filing software, which showed that many of the programs were not up to scratch when it came to security.

Anyone who earned under $62,000 last year will be eligible to file their taxes free of charge online using one of the thirteen software options that form part of the IRS program. However, the audit carried out by the Online Trust Alliance means that those who are going to be doing this need to be very cautious. The program has been in operation for thirteen years and around 70 percent of Americans are eligible to participate.

Nearly half of filing websites failed security protocols

The audit that was carried out showed that out of thirteen websites that are part of the IRS program for filing taxes online, close to 50 percent failed security protocols. There were various issues that arose when the audit was carried out such as lack of email authentication, which puts consumers at risk of falling victim to phishing scams.

One official from the Online Trust Alliance said that when the websites were tested they either did really well and passed with over 80 percent or failed altogether. Several of the websites that were tested failed security even the most basic security protocols, reflecting how easy it could be for people to become victims of fraud simply for using online software and websites to file their taxes.

The software websites that are used for filing online taxes are part of the Free File Alliance, which is a coalition of companies in the tax software field. These companies also offer fee based services that are more advances for those who are on incomes that are higher than the $62,000 threshold.

An official from the Free File Alliance commented on the findings by the Online Trust Alliance, stating that its members were tested and evaluated every year to ensure that they were offering the highest levels of security and privacy, However, he added that the findings from the research would be taken into consideration by officials from the Free File Alliance and would be incorporated into future assessments to ensure that users of the software could benefit from peace of mind when it came to security.